1st quarters points to solid casting shipment growth: if forecasts hold, the next few years could bring a booming world market for castings.

A look at the first quarter results for 2005 reflects the forecast for solid growth in almost all metalcasting markets.

Original forecasts for the next few years were based on a Gross Domestic Product (GDP) increase of 4.3% in 2005, but that forecast now is expected to rise to 4.5%, along with a 4.5% increase in housing starts and a 4% expansion in construction activity this year.

An annual gain of 448,000 tons in metal casting shipments is anticipated in 2005, compared to 2004. A further rise is expected in 2006 followed by forecasted peak years in 2007 and 2008.

Meanwhile, light vehicle production by U.S. carmakers increased approximately 0.5% during the first quarter of 2005, and medium to heavy truck production grew 30%. The return to production numbers of 12 million light vehicles/yr. and 380,000 medium to heavy trucks/yr. in 2005 can be expected.

Across the oceans, an analysis of the European and Asiatic markets suggest that booming market conditions in these areas will take place in 2006 and 2007. Thus, for the first time in many years, a booming world market for castings could be in the offing.

Stratecasts' methodology in forecasting utilizes macroforecasts based on econometric forecasts from major banks and institutions as well as forecasts from key industrial publications. Since some of these have changed from previous trends reports, the original macroforecasts have been compared with reported actual results (Table 1).

Casting shipments for 2005 and 2006 also have been forecast based on these macro changes and on new information gathered from interviews with key personnel of major companies in key market sectors. These shipment forecasts are covered in Table 2. The total forecast shows some significant changes that might take place in the near future. The actual total for 2004 is 1.5% greater than the original forecast, and the 2005 totals are projected at 1% more than the original forecast. Additionally, the forecast indicates an upturn in 2006 in most market sectors.

Casting capacity has been reduced due to the closing of major plants in recent years. Table 3 shows the utilization of metalcasting capacity in the U.S.

Analysis of Major Casting End-Use Markets

Motor Vehicles--The 2004 forecast for light vehicle production was slightly greater than the actual production, as shown in Table 1. Light truck production represented 63.6% of the total light vehicle production in the U.S. As shown in Table 4, gray iron, ductile iron and aluminum casting shipments to this sector are forecast to increase to 3.64 million tons in 2006 from 3.55 million tons this year. Conversion of engine blocks and heads from iron to aluminum continues to affect the forecast for casting production. The usage of aluminum in engine blocks in 2006 now is expected to reach 60%, while aluminum in cylinder heads rises to 96%.

Construction, Mining, & Oilfield Equipment--The value of construction machinery shipments increased 5% in 2004 and is expected to rise again in 2005. Equipment, such as tractor shovel loaders, hit a record $3.3 billion in value in 2004 and is forecast to rise to $3.5 billion in 2005. The value of scrapers, graders, off-highway trailers, tractors and wagons, compactors and rollers is expected to grow from $2.5 billion to $2.6 billion in 2006. The export market continues to dominate the picture as large equipment producers now export nearly 30% of their equipment to foreign countries, and the continued weakness of the dollar should spur further export growth in the next year. As shown in Table 5, the forecasted use of ferrous castings in construction equipment shows little to no change from 2005 to 2006.

After four years of decline, shipments of mining machinery rose 5% in 2004 and are expected to rise again in 2005 by the same amount. Exports continue to grow in the mining industry and now makes up 50% of the equipment produced. The growth in the European and Asian markets for this equipment should spur casting sales in the future.

Oilfield equipment sales had another big first quarter. This trend should continue into the second quarter of 2005 before tapering off. Casting shipments, as shown in Table 6, continue to grow, particularly ductile iron shipments, which are forecast to reach 80,000 tons by 2006.

Metalworking Machinery & Equipment After six years showing loss, the industry has bottomed out and begun a rebound in metalworking machinery and equipment. Machine tool sales were up 5% in 2004 and are expected to rise 3% per year in the next two years. Gray iron casting shipments rose in the first quarter and are expected to reach 53,000 tons this year.

Special Industry Machinery--The industries that make up the special industry sector--paper, printing, textile, plastic, woodworking, and food and packaging machinery--are expected to grow 3% per year in 2005 and 2006. Shipments of ductile iron and steel castings are to grow in use accordingly.

Refrigeration & Air Conditioning--Exports of equipment and machinery remain strong in the first quarter and have spurred castings sales despite import pressures. Aluminum casting shipments are expected to rise 8% in 2005.

Internal Combustion Engines--A 30% growth in truck production combined with more than 10% growth in construction and farm vehicle shipments has spurred the diesel engine casting business in the first quarter. Despite the fact that greater than 50% of the gray iron castings are imported, domestic tonnage rose more than 15% in the quarter and is expected to rise to 425,000 tons in 2005. Aluminum shipments for small gasoline engine applications are expected to rise to 124,000 tons in 2005, a 5% growth over 2004.

Farm Machinery--After a record farm income year in 2004, production of farm machinery rose 10% in the first quarter and is expected to grow at a slightly lower rate for the year. Table 7 shows the forecasted breakdown of ferrous casting shipments to this market sector.

Valves d Fittings--Based on a continued good year in housing starts and industrial use, the forecasts for valve and fitting castings have been revised (Table 7).

Imports of valves and fittings from Asiatic countries and others continue near 35% of total imports, keeping domestic casting shipments down. Threaded pipe and plumbing fittings continue to be made in malleable iron based on current ANSI specifications, though conversion of applications to ductile iron grows.

Shipments for stainless steel and high alloy valve castings continue to grow in food product, power generation, pulp and paper, waste water and chemical plant applications.

Pressure Pipe--Ductile iron pipe production increased slightly in 2004 to 2.1 million tons and is expected to increase further to 2.16 million tons in 2005. Exports by U.S. pipe producers continue to grow, spurred by the strength of the Japanese and European currencies.

Railroad--Freight car deliveries reached their highest level since 2000 in 2004 when 47,000 cars were produced. Based on current interviews, it is expected that nearly 55,000 cars will be delivered in 2005, with a possible 7% increase in 2006. Based on these estimates, forecasts of carbon and low alloy steel castings in railroad applications have been revised accordingly to 517,000 tons in 2004, 570,000 tons in 2005 and 600,000 tons in 2006.

Brass & Bronze Outlook

Though a long-term growth of 0.6% per year is forecast for brass and bronze castings (Fig. 1), specific market sectors indicate diverse production swings. The industrial valve and fitting market, for example, is expected to grow 0.8% annually, while the market for plumbing and sanitary fixtures and fittings drops 4%. Growth in marine hardware applications is forecast at 2.1% per year. Total brass and bronze casting shipments are estimated at 325,000 tons for 2005.

[FIGURE 1 OMITTED]

Table 1. Macroforecast Criteria--2004, 2005, 2006

                      GDP    Housing Starts   Construction Activity

Forecast 2003/2004   +4.2%       +5.0%                +4.5%
Reported 2003/2004   +4.4%       +5.7%                +4.5%
Forecast 2004/2005   +4.5%       +4.5%                +4.0%
Forecast 2005/2006   +4.6%       +4.0%                +3.5%

Domestic Motor Vehicle Production (millions of units)

                  Passenger Car/Light Truck   Medium/Heavy Truck

Forecast 2004               12.4                     0.30
Reported 2004               11.6                     0.35
Forecast 2005               12.8                     0.35
Reforecast 2005             12.0                     0.38
Forecast 2006               12.6                     0.40

                Railroad Freight Car Shipments

Reported 2004            47,000 units
Forecast 2005            55,000 units
Forecast 2006            59,000 units

Table 2. Shipments of Metal Castings (in 000 tons)

                     2004      2004      2005        2005        2006
                   Forecast   Actual   Forecast   Reforecast   Forecast

Gray Iron            4,721     4,770     4,807       4,837       4,881
Ductile Iron         4,414     4,485     4,591       4,633       4,781
Malleable Iron          84       100        72          85          80
CG Iron                 95        97       105         110         116
C & LA Steel           954     1,054     1,018       1,118       1,114
Heat-Res. Steel         35        36        35          36          39
Corrosion-Res.
  Steel                 90        91        95          95         102
Mn Steel                40        42        43          45          48
Other Steel             34        34        35          35          36
Aluminum              2309      2269      2456        2410        2530
Copper Base            317       320       323         325         329
Zinc/Lead              360       366       342         350         341
Magnesium               93        88       113         105         130
Other Nonferrous        52        52        55          55          57
Investment Cast        163       163       177         177         188

TOTAL               13,761    13,967    14,267      14,416      14,772

Table 3. 2005 Utilization of Metalcasting Capacity in the U.S.

                       Capacity    Utilization
                      (000 tons)       (%)

Iron                    11,330          85
Steel                    1,500          89
Aluminum                 2,900          83
Copper Base                390          83
Magnesium                  140          75
Zinc/Lead                  400          87
Other Nonferrous            70          79
Investment Castings        200          89

TOTAL                   17,030          85

Table 4. Passenger and Light Car Truck Casting Shipments

                Tons of Castings Per
                 Year (in 000 tons)

                2004    2005    2006

Gray Iron      1,041   1,075   1,067
Ductile Iron   1,024   1,037   1,060
Aluminum       1,332   1,442   1,515

                Total Light Vehicles
               (millions of vehicles)

               11.61    12.0    12.6

Table 5. Forecast Shipments of Ferrous Castings in Construction
Equipment (in 000 tons)

               2004   2005   2006

Gray Iron       250    260    260
Ductile Iron    200    210    212
C & LA Steel    170    172    170

Table 6. Casting Shipments for Oil Field Equipment  (in 000 tons)

               2004   2005   2006

Gray Iron       57     60     60
Ductile Iron    73     76     80
Steel           52     54     53

Table 7. Ferrous Casting Shipments for Farm Machinery (in 000
tons)

               2003   2004   2005   2006

Gray Iron       288    370    320    310
Ductile iron    114    128    130    130

Table 8. Shipment Forecast for Valve and Fitting Castings (in 000 tons)

                       2004   2005   2006

Gray Iron               268    276    282
Ductile Iron            220    226    232
Malleable Iron           38     37     36
C & LA Steel             66     62     60
Corrosion Res. Steel     27     29     31
Brass & Bronze          102    104    106
Investment Cast          47     51     54

For More Information

"11% Growth Forecast for Next 4 Years, Led by Aluminum, Ductile Iron," K.H. Kirgin, MODERN CASTING, January 2005, p. 22-27.

"Global Boom, Shipments to Reach 83 Million Tons in '07," K.H. Kirgin, MODERN CASTING, March 2005, p. 39-46.

About the Author

A 50-year metalcasting industry veteran, Kenneth Kirgin founded Stratecasts in the early 1980s to provide domestic and international forecasting and trends analysis and strategic planning.